Tax on Property Transfers in Malta

Property in Malta is a much-discussed topic, not least because of an economical boom that saw demand for property rise to record-breaking heights. It is also the subject of complex and to some extent confusing discussions when it comes to taxation on property transfer. Due to frequent amendments to the Maltese tax legislations, this area has become particularly detailed, precise and allowing no room for vague interpretations. This also means however, that the intricacies of the law might be lost on a number of individuals. In this article we hope to briefly outline tax law on property transfer, while also offering our services in that regard.

Previously, tax on property transfer was calculated on the total person’s income and charged on normal income rates, since the gains from said transfer were added to the person’s income. This was before the present system of taxation was adopted in 2006, and it rendered the process more complex to calculate. However, as of 2006 and applicable on transfers of property occurring after the 1st of November 2005, transfers of property were taxed with a final tax rate on the percentage of either the consideration payable on the transfer of the property or the market value of said property, whichever the highest. This is a fixed percentage, which may however change according to circumstance. Here is a breakdown of the default rate as well as alternative final rates in particular instances as described below:

8% of the transfer value of the property. This is the default rate on property acquired after the 1st of November 2005.

10% of the transfer value of the property if property was purchased (or deemed to have been purchased) before the 1st of January 2004

5% when the property is transferred within 5 years from the date of acquisition, and it does not form part of a project;

5% on property that has been restored situated in an Urban Conservation Area or if the property is scheduled by the Planning Authority;

2% when an individual or two individuals that are co-owners transfer their sole ordinary residence within 3 years from the date of acquisition.

7% when transferor is a non-Maltese resident who is subject to tax on the profits in his country of residence

12% when the property was purchased before the 25th of November 1992, on the difference between the acquired price of the property and the transfer value of the property

Transfer of property outside Malta are aggregated to the transferor’s income and charged at normal income rates.

This method of taxation is more straightforward and enables both transferors and administrators to settle accounts as soon as the deal is signed. The property and profits derived therewith are not taxed further and cannot be refunded or be subject to a credit. The correlation between the tax rate and the time elapsed between purchase and transfer is evident and thus also makes it simpler to calculate the final tax rate.